EMERGING MARKETS-Colombia peso leads losses in Latam FX markets

Tue Jan 15, 2013 3:16pm EST

* Colombia hints at more intervention to curb peso gains
    * US fiscal debate weighs over Latam currencies in general
    * Brazil real drops 0.2 pct; Mexico peso down 0.1 pct

    By Walter Brandimarte
    RIO DE JANEIRO, Jan 15 (Reuters) - The Colombian peso led
losses in Latin American foreign exchange markets on Tuesday,
after the government hinted at more aggressive intervention to
curb the currency's strength and protect exporters.
    Other currencies in the region also posted losses as the
U.S. fiscal debate heated up in Washington, reducing investor
appetite for emerging markets assets in general. 
    The Colombian peso dropped 0.6 percent to
1,769.95 per dollar after Finance Minister Mauricio Cardenas
said the government is studying ways to step up dollar
purchases, in an attempt to halt a rally that increased the
peso's value by nearly 9 percent last year. 
    The Colombian central bank could increase the size of its
dollar purchases to a daily average of $30 million, estimated
Felipe Hernandez, a Latin America strategist with RBS.
    "We acknowledge additional central bank intervention could
moderate currency appreciation in the medium term, but believe
it would still allow for more appreciation in the short-term if
dollar inflows during the next few weeks or months more than
offset central bank demand," Hernandez wrote in a research note.
    
    U.S. FISCAL CONCERNS
    The Mexican peso declined 0.1 percent and remained
vulnerable to further losses after gaining more than 3 percent
since late December to a 10-month high on Monday.
    Uncertainty about how U.S. lawmakers will resolve a debate
about lifting the country's borrowing limit to avoid a
potentially disastrous debt default could weigh on the peso in
the coming weeks, analysts said.
    "We are expecting a breather and a possible correction in
the markets," said Rodolfo Campuzano, head of analysis at
brokerage Invex in Mexico City, adding that the peso could
weaken back to between 12.80 and 12.90 per dollar.
    Mexico sends nearly 80 percent of its exports to the United
States and it could suffer the most if U.S. debt and budget
negotiations hurt the U.S. economy. Mexico's currency is also
one of the most liquid emerging market assets and the peso
swings sharply according to the global appetite for risky
assets.
    The Brazilian real  closed 0.2 percent weaker at
2.0355 per dollar, also pressured by U.S. fiscal concerns, which
increased after President Barack Obama rejected on Monday any
negotiations with Republicans over raising the U.S. borrowing
limit. 
    Analysts expect, however, the real to strengthen near the
level of 2 per dollar in the medium term as rising inflation
will probably make the central bank more tolerant to a stronger
currency.
    Brazil's inflation currently runs above the center of a
government target of 4.5 percent, plus or minus two percentage
points, and an expected increase in domestic fuel prices in the
next few weeks will likely complicate the central bank's
monetary policy. 

    Latin American FX prices at 2004 GMT:
    
 Currencies                         Daily  YTD pct
                                      pct   change
                                   change  
                          Latest           
 Brazil real              2.0355    -0.20     0.22
                                           
 Mexico peso             12.6300    -0.08     1.85
                                           
 Chile peso             474.9000    -0.29     0.80
                                           
 Colombia peso          1769.950    -0.59    -0.22
                               0           
 Peru sol                 2.5410    -0.16     0.39
                                           
 Argentina peso           4.9475     0.10    -0.71

 Argentina peso           7.3400    -1.23    -7.63
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